Budget outlook still gloomy

A disastrous fiscal year for the state’s two primary budgets ends today, but the economic woes will continue into the new fiscal year and beyond, barring an unexpected surge in revenue.

By Dana BeyerleMontgomery Bureau Chief

MONTGOMERY | A disastrous fiscal year for the state’s two primary budgets ends today, but the economic woes will continue into the new fiscal year and beyond, barring an unexpected surge in revenue.With the state’s “rainy day” accounts now depleted, cuts are virtually certain in the General Fund and Education Trust Fund budgets for the 2010-2011 fiscal year, which begins Friday.Now, lawmakers and state administrators are looking ahead to next fiscal year and they see more of the same.“Unless the economy improves drastically, we’re looking at a train wreck of huge proportions,” state Rep. Jack Page, D-Gadsden, said Wednesday of the 2011-12 budgets. Page is vice chairman of the House Government Appropriations Committee, which crafts the General Fund. The Legislature will take up next year’s budgets when it convenes in March.The budgets that take effect Friday, adopted by the Legislature earlier this year, are not much different than the current year’s, but they would have been considerably worse had it not been for federal spending and state savings accounts.“These are very nervous and challenging times for school people in Alabama,” state Superintendent of Education Joe Morton said.Morton said the new education budget will need tax growth of 3 percent to avoid proration sometime during the year.“While both FY 2011 and 2012 are scary, I am not as worried about realizing 3 percent growth in FY 2011 as I am about what the FY 2012 education budget will look like when all federal stimulus funding expires and when repayments to the rainy day fund need to begin,” Morton said. “To me, the funding difference for FY 2012 is even more daunting than the possibility of proration of FY 2011.”This year’s Education Trust Fund and General Fund both ended today in proration — across-the-board cuts required because of poor economic conditions that reduced tax revenues.Since Alabama’s government cannot engage in deficit spending, proration is required if anticipated revenues will not meet budgeted spending.Gov. Bob Riley earlier this month increased proration in the education budget from 7.5 percent to 9.5 percent. Earlier this week, he took $37.8 million from the General Fund rainy day account to reduce proration’s impact on that budget from 12 to 10 percent.Acting state Finance Director Bill Newton said that $17 million remains in the General Fund rainy day account. Nothing remains in either Education Trust Fund savings account and one of them must be repaid.Jeff Emerson, spokesman for the governor, said Riley has no plans to declare proration in either new budget. An early declaration of proration spreads the impact of cutting monthly disbursements to schools and state agencies.“I hope (proration is) not necessary but the earlier you declare proration the easier it is for entities affected to make adjustments,” Page said.The 2008-09 education budget was $5.71 billion. This year’s was $5.326 billion and starting Friday it will be $5.5 billion. The budget is buoyed by a second year of federal stimulus funds.The only light at the end of the fiscal tunnel is more than $100 million in federal stimulus funds for K-12 salaries and benefits, saving thousands of public education jobs.The 2008-09 General Fund budget was $1.787 billion. This year’s General Fund appropriation was $1.6 billion. The new General Fund budget that pays for state services will be $1.57 billion.The education budget this year and the last two fiscal years had the benefit of a combined $876.4 million from rainy day and proration prevention accounts. Those accounts are zeroed out, leaving none for the new fiscal year that lawmakers expect will be a continued financial disaster.State agencies will be allowed to carry unspent appropriations into the new fiscal year but carry-forward amounts haven’t been figured. “That will not be known until we have completed the year-end close-out process,” Newton said.Page said a ray of “hope” for the state is that claims made “either through litigation or negotiation” against BP for the Gulf oil spill will be settled quickly in the state’s favor. “I hope we get a reasonable and substantial settlement,” he said.Riley said he was negotiating with BP over the state’s $148 million claim and the state would have been paid by now but for a lawsuit that Attorney General Troy King filed against BP for damages, the Montgomery Advertiser reported.King responded by saying that states that did not sue BP have not been paid either, the Advertiser reported.

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